Before December, Insignia Systems (NASDAQ:ISIG) likely wasn’t on the radar of most investors. A small cap name in the marketing space, for many years ISIG stock languished in obscurity. But a little over a month ago, it began to experience a big breakout in price.
It all started on Dec 6, when Insignia announced it was exploring a possible sale of the company. News of this resulted in a more than 200% move higher that trading day. Yet while pulling back by around 31% the following day, that wasn’t the end of its epic run-up in price.
Since making that initial leap on Dec. 6, from around $5 to around $15 per share, it’s since zoomed to around $23 per share. Now, it hasn’t exactly been a straight shoot to its current price levels. Throughout last month, it continued to move wildly, falling back to around $12 per share before making it back to the high-$20s per share.
Much of the focus with this once under-the-radar stock has been with its perceived short-squeeze potential. However, it’s important to note there are many catalysts at play that have more to do with the company’s fundamentals. These may be key to its performance going forward. Besides the above-mentioned possible sale, what are these catalysts? Let’s dive in and find out.
ISIG Stock at a Glance
Based in Minneapolis, Minnesota, Insignia Systems’ legacy business provides in-store and display advertising solutions to consumer product companies. In other words, it’s one of the many firms that manage those ads you see in the supermarket aisles. Knowing full well there’s limited opportunity in this “old school” industry, Insignia has wisely worked on becoming more like a digital marketing firm in recent years.
News of it looking for a buyer is what sparked the big spike in the price of ISIG stock starting last month. But more recently, it’s been sustained by its appeal as a short-squeeze play. As InvestorPlace’s Chris McDonald reported Jan. 10, the stock’s short interest currently stands at around 47%.
With this high short interest, it may be attracting interest from the Reddit trading community, although that’s not for certain. Having said all this, I wouldn’t buy it just on the short squeeze angle alone. I would buy this for more substantial reasons, not as a bet on investor psychology.
Fortunately, there are other possible catalysts on the table that could give a further lift to Insignia shares. Although it’s not guaranteed any or all of them will pan out, they do make it a more interesting situation than many other similar short-squeeze stocks.
Many Possible Paths to More Upside
With its 5x move in a little over a month, you may think ISIG stock is running out of runway. Yet even after its recent incredible run, there are several other factors that could help it surge to even higher prices. Not just the potential for its squeeze to last longer than expected.
First, one that we’ve already discussed, its potential as a takeover target. Currently operating in the red, you may not think this is the type of company a strategic acquirer or private equity firm may want to buy. However, there may be some interest in it as a bolt-on acquisition. A buyer could wring out significant cost savings, by consolidating it into a larger operation.
Second, improvements in its operating results would likely help to move it higher. There’s potential for this happening down the road, as it repositions itself as a digital advertising company. Third, a favorable ruling in an antitrust lawsuit filed against a much larger competitor could possibly move the needle as well.
Put simply, it’s shortsighted to write off it as just a “short-squeeze” play. As is the case with many small-cap names, changes in its prospects can result in outsized moves for its stock.
The Verdict on ISIG Stock
Earning a “B” rating in my Portfolio Grader, I will say that risk-averse investors may want to skip out on it. More likely than not, this stock will continue to make wild moves.
Traders who bought it on a whim as a squeeze play may get impatient. Before moving higher on any of the non-squeeze factors I listed above, Insignia shares could make a trip back to $10-$15 per share. Also, while there are many possible paths to higher prices, the key word here is possible.
It’s not guaranteed that the company will find a buyer. It’s also far from a lock that it successfully turns around its operations. Or, that it prevails in its legal battle with a larger rival.
Nevertheless, if you’re active in riskier plays and are looking for one with a bit of optionality, ISIG stock may be a worthwhile opportunity.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
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